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2016 (8) TMI 326 - AT - Income TaxAddition made on account of provision for IBNR as ascertained liability - whether the the same need not be added back to book profits computed u/s 115JB? - Held that - We find that the ld CITA had given a categorical finding that the provision made for liabilities incurred but not reported (IBNR) made by the assessee as per the regulations framed by Insurance Regulatory Development Authority (IRDA) based on a scientific calculation with a proper rationale could only be termed as ascertained liability. Hence the same need not be added back by treating the same as an unascertained liability while computing the book profits u/s 115JB of the Act. The revenue was not able to controvert the findings given by the ld CITA before us. Hence, we find no infirmity in the order of the ld CITA in this regard and accordingly dismiss the Ground raised by the revenue - Decided in favour of assessee. Addition made on account of provision for unidentified motor third party claim as ascertained liability - whether the the same need not be added back to book profits computed u/s 115JB? - Held that - The provision created on account of unidentified Motor Third Party claim will not fall under sub section 115JB(2)-Explanation 1 (c) of the Act. Therefore, no addition is required while computing the tax liability u/s 115JB of the Act. Hence, we set aside the orders of the revenue authorities on this issue and direct the Assessing Officer not to make any adjustment on account of the provision under unidentified Motor Third Party claim while computing the tax liability u/s 115JB of the Act. - Decided in favour of assessee. Interest u/s 234B and 234C of the Act - whether interest should not be charged on account of addition to the total income due to retrospective amendment? - Held that - In a case like the present one where on the last date of the Financial Year preceding the relevant assessment year, the assessee had no liability to pay advance tax, he would be nevertheless asked to pay interest in terms of section 234B and section 234C of the Act for default in making payment of tax in advance which was physically impossible.- Decided in favour of assessee. Disallowance of Employees Contribution to Provident Fund - Held that - As decided in assessee s own case for Asst Year 2001-02 we are of the view that since the assessee has credited both employees as well as employers contributions to the individual accounts of the employees on the date of recovery of the provident fund in our opinion assessee fulfils the requirements mentioned u/s. 36(1)(va). Therefore we set aside the orders of the revenue authorities on this issue and direct AO to give relief - Decided in favour of assessee. Disallowance of Amortisation of Premium paid on Purchase of Investments - Held that - If the particular item of dispute (debit entry made in the profit and loss account) falls under the category of expenditure or allowance or provision and the same is not admissible under the Act, only then the concerned item can be added back in computing the income from general insurance business. From the above facts, it is clear that the disallowance of amortised premium paid on investments made by the ld AO is not in accordance with the prescribed specific procedure in the assessee s case. The ld CITA duly appreciated the contentions of the assessee deleted the dis allowance correctly. SEE case of General Insurance Corporation of India vs CIT reported in (1999 (9) TMI 3 - SUPREME Court) and CIT vs Oriental Fire & General Insurance Co Ltd 2007 (5) TMI 193 - SUPREME Court - Decided in favour of assessee. Disallowance of Investments written off - Held that - It is observed that in the above-referred Rule 5 of the First Schedule it has been mentioned that certain expenditure or allowance or provision can be added back only if the same is not admissible under sections 30 to 438 of the Act and there is no specific mentioning of adding back of any amount written off out of investments. From the above-referred Supreme Court decisions it is clear that if the particular item of dispute (debit entry made in the Profit & Loss Account) falls under the category of expenditure or allowance or provision , and the same is not admissible under the Act, only then the concerned item can be added back in computing the income from general insurance business. From the above facts it appears that the disallowance of the writing off of investments, made by the Assessing Officer is not in accordance with the prescribed specific procedure in the appellant s case. - Decided in favour of assessee. Disallowance of Provision for Bad & Doubtful Debts - Held that - We find that strangely the revenue had preferred an appeal against this ground which is not warranted when the issue was decided by the ld CITA in favour of the revenue. - Decided in favour of assessee. Addition towards Reserve created for Unexpired risk u/s 115JB - Held that - We find that the ld CITA had dealt this issue very elaborately and had given proper finding that the reserve created for unexpired risk need not be added back for the purpose of computation of book profits u/s 115JB of the Act. The revenue was not able to controvert the findings of the ld CITA before us. Hence we find no infirmity in the order passed by the ld CITA in this regard - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition on account of provision for IBNR. 2. Deletion of addition on account of provision for unidentified motor third-party claim. 3. Charging of interest under sections 234B and 234C due to retrospective amendment. 4. Disallowance of employees' contribution to Provident Fund. 5. Disallowance of amortization of premium paid on purchase of investments. 6. Disallowance of investments written off. 7. Disallowance of provision for bad and doubtful debts. 8. Addition towards reserve created for unexpired risk under section 115JB. Detailed Analysis: 1. Deletion of Addition on Account of Provision for IBNR: The first issue was whether the CIT(A) was justified in deleting the addition made on account of provision for IBNR amounting to ?12,77,00,000 as an ascertained liability. The assessee argued that the provision was made as per IRDA guidelines and should not be treated as an unascertained liability. The CIT(A) agreed, stating the provision for IBNR could not be termed as a provision for unascertained liability. The tribunal upheld this view, finding no infirmity in the CIT(A)'s order. 2. Deletion of Addition on Account of Provision for Unidentified Motor Third-Party Claim: The second issue was whether the CIT(A) was justified in deleting the addition of ?37,69,96,000 on account of provision for unidentified motor third-party claims. The assessee contended that this provision was made according to guidelines and was an ascertained liability. The CIT(A) and the tribunal both agreed that the provision could not be treated as an unascertained liability, following the precedent set by the tribunal in the assessee's own case for AY 2001-02. 3. Charging of Interest Under Sections 234B and 234C Due to Retrospective Amendment: The third issue involved whether interest under sections 234B and 234C should be charged due to additions made by retrospective amendments. The CIT(A) directed that such interest should not be charged, citing the decision of the Jurisdictional High Court in Emami Ltd vs CIT. The tribunal upheld this view, noting that retrospective amendments could not have been anticipated by the assessee. 4. Disallowance of Employees' Contribution to Provident Fund: The fourth issue was the disallowance of ?2,22,78,598 for delayed deposit of employees' contribution to Provident Fund. The CIT(A) deleted the disallowance, noting that the assessee had credited both employees' and employers' contributions to individual accounts on the date of recovery. The tribunal upheld this decision, following its earlier ruling in the assessee's own case for AY 2001-02. 5. Disallowance of Amortization of Premium Paid on Purchase of Investments: The fifth issue was the disallowance of ?6,02,18,000 towards amortization of premium paid on investments. The CIT(A) deleted the disallowance, stating that the premium paid on investments could not be disallowed as there was no specific provision in the Act for such disallowance. The tribunal upheld this decision, citing the Supreme Court rulings in General Insurance Corporation of India vs CIT and CIT vs Oriental Fire & General Insurance Co Ltd. 6. Disallowance of Investments Written Off: The sixth issue was the disallowance of ?4,22,26,000 for investments written off. The CIT(A) deleted the disallowance, noting that the write-off could not be considered as either "expense" or "allowance" and thus should not be added back. The tribunal upheld this decision, following the CIT(A)'s detailed reasoning and the Supreme Court rulings. 7. Disallowance of Provision for Bad and Doubtful Debts: The seventh issue was the disallowance of ?5,12,36,000 for provision for bad and doubtful debts. The CIT(A) had upheld this disallowance, and the revenue's appeal on this ground was found to be unwarranted as the issue was already decided in favor of the revenue. 8. Addition Towards Reserve Created for Unexpired Risk Under Section 115JB: The eighth issue was the addition of ?169,45,00,000 towards reserve for unexpired risk while computing book profits under section 115JB. The CIT(A) deleted the addition, stating that the reserve for unexpired risk was not debited to the Profit & Loss account and was a statutory requirement under the Insurance Act, 1938. The tribunal upheld this decision, finding no infirmity in the CIT(A)'s reasoning. Conclusion: All the appeals by the revenue were dismissed, and the CIT(A)'s decisions were upheld by the tribunal. The detailed analysis and reliance on Supreme Court rulings and precedents in the assessee's own cases were key factors in the tribunal's decisions.
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